Citigroup earnings miss estimates on litigation, reserves

Reserve Release

A reserve release improves net income as the bank reduces the amount of losses it forecasts on future soured loans. The biggest U.S. lenders have boosted earnings this way as credit quality improved after the financial crisis. Citigroup’s benefit was the firm’s smallest since 2010, according to a financial supplement.

Citigroup has repeatedly “trashed the fourth quarter,” said Charles Peabody, an analyst with Portales Partners LLC in New York. “One has to wonder if the first three quarters of the year are truly reflective of their core earnings power.”

Citigroup gained 21% in the quarter in New York trading, the second-best performance after Charlotte, North Carolina-based Bank of America on the KBW Bank Index. The stock climbed 50% in 2012, its biggest increase since 1999.

The shares have advanced 16% since Citigroup directors installed Corbat as CEO in October to replace Pandit. The board concluded that Pandit had mismanaged the firm’s operations, including his failure to get Federal Reserve approval to increase dividends or introduce share buybacks, a person familiar with the matter said at the time.

Forese, Medina-Mora

Corbat’s plans to overhaul the bank’s operations included the appointment of Jamie Forese and Manuel Medina-Mora as co- presidents. Forese, 49, is now in charge of all institutional businesses, including trading and investment banking, while Medina-Mora, 62, continues to run consumer banking.

Medina-Mora’s consumer bank posted a $1.76 billion profit for the quarter as expenses increased 6%, including the higher legal costs. The figure missed the estimate of David Trone, an analyst at JMP Securities LLC in New York, who predicted $2.04 billion.

Profit at the North America consumer bank gained 6% to $1 billion while net income at the Latin American unit rose 9%  to $401 million. Asian consumer banking profit slid 3 percent to $397 million as revenue fell while expenses rose.

Corbat plans to fire 6,200 workers from the consumer bank and pull back or sell the division’s operations in Pakistan, Paraguay, Romania, Turkey and Uruguay, according to a December statement.

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